Ken Hare In Depth: Expanding Medicaid would be huge economic boost

Gov. Robert Bentley held a press conference on Tuesday at which he praised the impact on Alabama's economy of the new Airbus aircraft plant in Mobile, and for good reason. It is impressive. The Airbus plant is expected to have a $409 million economic impact on the state's economy.

But the governor apparently is still stubbornly turning his back on an investment in the state that would have almost 50 times that much of an impact on the Alabama economy -- an expansion of Medicaid to serve about 300,000 more Alabamians.

Economists estimate that such an expansion, which would be paid for almost entirely with federal dollars, would have a $20 billion economic impact in Alabama.

So why is Bentley and other Republican elected officials saying no to this huge investment in the state's economy -- one that would have economic benefits that would ripple far beyond the state's health-care industry?

Politics, plain and simple. The Medicaid expansion would come under the federal Affordable Health Care Act, often dubbed Obamacare. And Bentley is one of the GOP governors to say they would not allow the expansion in the state -- although Bentley has left some wiggle room by saying "at this time."

Meanwhile, the numbers of Republican governors to say that they will oppose the expansion in their state are dwindling.

Last week, GOP Gov. Rick Scott of Florida said he would not oppose Medicaid expansion in his state. This week, New Jersey Gov. Chris Christie said he would support an expansion in his state. The conservative Republican governors of Arizona, Michigan and Ohio also have reversed their stands and now support expansion. Other GOP governors are still weighing their options.

Scott, an outspoken critic of Obamacare, said, "To be clear: our options are either having Floridians pay to fund this program in other states while denying health care to our citizens, or using federal funding to help some of the poorest in our state with the Medicaid program as we explore other health care reforms."

Christie also made the point that not accepting the money would mean it would simply be spent somewhere else, while New Jersey taxpayers still would be responsible for their share of the federal taxes.

The economic benefits to Alabama from expansion will become increasingly difficult for Alabama's elected officials to ignore.

If Alabama opted to expand Medicaid under the federal Affordable Health Care Act starting in 2014, the federal government would assume almost the full cost of the expansion through 2016. The state would have to start assuming a larger share of the cost after that, but the state's share would top out at 10 percent starting in 2020.

The federal government would cover 100 percent of actual health care expenditures from 2014 through 2016, although Alabama would be responsible for a share of administrative costs amounting to about $39 million a year.

The total cost to the state through 2020 would be $771 million. Meanwhile, during that seven-year span, the federal government would pump an additional $11.7 billion into Alabama health care.

Over the next 10 years, according to the Kaiser Commission on Medicaid and the Uninsured, Alabama would spend about $1 billion for the expanded Medicaid coverage while getting about $14 billion in additional federal support. After 10 years, the state would get $10 for every $1 invested.

There are some concerns about where state government would get its share of the cost of expansion. But two professors at the University of Alabama Birmingham did a study of the economic impact of the Medicaid expansion in Alabama, and found all that federal spending in Alabama should generate a lot of additional state tax revenue -- enough to more than cover the cost of the state's share of the program.

The study estimated that the proposed Medicaid expansion in Alabama would generate $20 billion in new economic activity, which in turn would generate $1.7 billion in new tax revenue for the state from 2014 to 2020.

So if you subtract the $771 million in state costs for the expansion from the $1.7 billion in new tax revenues, state government revenues would come out ahead by almost a billion dollars, according to the study.

A similar study done by a professor at Georgia State University found a huge economic benefit in Georgia as well. It estimated that expanding Medicaid in Georgia would generate 70,000 new jobs statewide and give Georgia's economy an $8.2 billion boost each year. It would also increase state and local tax revenue by more than $275 million annually.

Studies in other states are finding similar economic impacts.

As I have noted before, Alabama's political leaders have shown a willingness to invest hundreds of millions of dollars in incentive money to attract automotive and aeronautics industries to the state. Like a Medicaid expansion, those new industries bring jobs and money to spur the state's economy.

So except for politics, why are state officials turning their backs on an offer to invest $14 in Alabama's economy for every $1 the state puts up?

As other studies come out and other states decide to expand, that's going to become a question that is increasingly difficult for the governor and other state elected officials to ignore.

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Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at khare@wsfa.com.